While foreign investors such as China have threatened for months to dump Treasuries they are instead grabbing every last one they can get their hands on.
Foreigners have purchased 43.1 percent of the $1.41 trillion of Treasury notes and bonds issued so far this year, compared with 27.1 percent of the $527 billion issued at this point in 2008, government figures show, Bloomberg reports.
The Merrill Lynch Treasury Master Index of U.S. securities returned 1.18 percent in the third quarter after the worst first half on record. Demand at Treasury auctions from the investor group, which includes central banks, surged to record heights.
China is the biggest foreign owner of Treasuries, making net purchases of $24.1 billion in July and raising the country’s Treasury holdings 3.1 percent to $800.5 billion, the latest official data show.
China’s Treasuries kitty has gained 10 percent this year, after a 52 percent jump last year.
“The interest rate on long-term Treasury bonds is at a very low level by historical standards,” David Dollar, the Treasury Department’s economic and financial emissary to China said at a recent conference.
“That says that the market has confidence the U.S. will get the fiscal problem under control.”
Some domestic players are much more cautious.
James Cramer, host of CNBC’s Mad Money, thinks inflation will do in Treasuries.
“I think the big run in U.S. Treasuries has ended,” he said on his show. “It’s time for you to sell 10-year and 30-year Treasuries.”
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